Strategic Information Management
Nowshad M Shawon
Abstract
Bank is one the most important financial sectors. Internet has made the banking function easier and changed the traditional banking system. The aim of this report is to compare the historical performance of Barclays and Standard chartered bank, impacts of E-banking and the customer perception on E-banking. To make the report uneatable, the author included brief history of the banks. In the first section of the analysis, the author discussed the historical performance of Barclays and Standard chartered through the use of MS-Excel. In the second section, the author discussed the positive and negative impacts of E-banking and finally at the end of this report, the customer perception on E-banking has been discussed through primary data collected by a questionnaire from the customers of Barclays and Standard chartered.
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Table of Contents 1 Introduction ...... 4 1.1 Background of the Banks ...... 4 1.1.1 Barclays Plc ...... 4 1.1.2 Standard Chartered Plc ...... 5 2 Comparative analysis of Historical performances of Barclays Plc & Standard Chartered Plc ...... 6 2.1 Profitability Ratio ...... 6 2.1.1 Data from Barclays’s Annual Report (2007-2011) ...... 7 2.1.2 Data from Standard Chartered Annual reports (2007-2011) ...... 7 2.1.3 Comparing Net Profit Margin ...... 8 2.1.4 Comparing Return on Assets ...... 9 2.1.5 Comparing Return on Equity ...... 10 3 Impacts of E-Banking ...... 11 3.1 Positive Impacts ...... 11 3.1.1 24 Hours Service ...... 11 3.1.2 Time consuming ...... 11 3.1.3 Customer Increases ...... 11 3.1.4 Cost Effective ...... 11 3.2 Negative Impacts / Challenges ...... 12 3.2.1 Business Risk ...... 12 3.2.2 Criminal Activities ...... 12 3.2.3 Reputational Risk ...... 12 3.2.4 Security ...... 12 4 Primary Data Analysis ...... 13 5 Conclusion ...... 17 6 References ...... 18 7 Appendix ...... 20
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Table of Figure
FIGURE 1: COMPARING NET PROFIT MARGIN ...... 8 FIGURE 2: COMPARING RETURN ON ASSETS ...... 9 FIGURE 3: COMPARING RETURN ON EQUITY ...... 10 FIGURE 4: GENDER OF RESPONDENTS...... 13 FIGURE 5: HOW MANY RESPONDENTS USE ONLINE BANKING ...... 14 FIGURE 6: FREQUENCY OF USING ONLINE BANKING ...... 15 FIGURE 7: DO CUSTOMERS FEEL SAFE TO USE E-BANKING ...... 15 FIGURE 8: RESPONDENTS PREFERRING TO DO BANKING TRANSACTION ...... 16 FIGURE 9: WHICH BANK IS BETTER FOR E-BANKING ...... 16
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1 Introduction E-banking has changed the traditional banking system. Now the banking system is more flexible and capable. Any banking transaction using internet and electronic sources is called E-banking. Now customers do not need to wait long in the queue for a transaction. E- banking made it easier for both banks and customer. Now bank transaction is a matter of few clicks in computer.
E-banking can be done from anywhere using ATM machine, the internet or cell phone. No matter how far you are from your bank or financial institution, you can still access the e- banking services (Wassenberg et al, 2008).
The aim of this report is to compare historical performances of any two banks and to discuss the impacts of E-banking. The author has chosen Barclays and Standard Chartered to discuss the historical performances and impacts of E-banking. The annual reports of two banks and other financial resources have been used to produce the outcomes. MS Excel has been used to present the compared data in this report. 1.1 Background of the Banks
1.1.1 Barclays Plc Barclays is one of the most important global financial service contributors. Barclays’s services include: Investment banking, Credit card services, wealth and investment management, corporate banking and personal banking. Barclays has 300 years history in banking sector. This is one of the first banks in UK and at present Barclays is providing its services over 50 countries in Asia, America, Africa and Europe (Barclays, 2012). According to KPMG (2012) Barclays ranked as 2nd place in 2001 among UK banks for its profit before tax and total assets, although the ranked goes down one steps in 2012.
1.1.1.1 History of Barclays:
Barclays has very old banking history in UK. Barclays started its journey 300 years back in 1690. John Freame and Thomas Gould are the founders of Barclays bank. In the first time Barclays was a goldsmith bank in Lombard Street, London. In 1736, James Barclays the son of law of John Freame joint in the business as a partner, at that time the name Barclays
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become connected to the business. In 1896, the business had a huge changed and formed as the Barclays and company ltd. The real journey was started In 1917 when Barclays became Barclays bank limited. In 1922, Barclays Bank started international banking. In 2001, started the first ever global ATM alliance with the partnership of five major banks to provide ATM services for customers. Recently, Barclays introduced many E-banking technologies within this sector, they started contactless card and in 2012, Barclaycard introduced PayTag in the UK market (Barclays , 2012).
1.1.2 Standard Chartered Plc Standard Chartered is one of the top five banks in UK. It was ranked 3rd for profit before tax and 5th for total assets. In this year, standard chartered step up one position for profit before tax KPMG (2012).
1.1.2.1 History of Standard Chartered Plc
Standard chartered has 150 years glorious history. The bank started it journey through the merge of standard band and the chartered bank of India. Chartered bank of India founded in 1853 by James Wilson. The first branch of Chartered bank was in Mumbai, later this bank started international journey through a Hong-Kong branch in 1859. In 1862, john Peterson founded the standard bank in South Africa. In 1965, standard bank merged with bank of West Africa. Finally in 1969, standard bank of Africa and Chartered bank of India merged and become Standard chartered Plc (Standard Chartered, n.d).
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2 Comparative analysis of Historical performances of Barclays Plc & Standard Chartered Plc To analyse comparative historical performances of Barclays Plc and Standard chartered, the author used 2007-2011 financial annual report of these two banks. In addition, Information from KPMG’s report on UK bank has been used to do the comparative analysis. 2.1 Profitability Ratio Profitable ratio is a general determiner of overall financial success of a business organization. It provides a measurement for management with consider to how the strategies are working and also provides caution of descending trend and thus the need of more remarkable changes, exterior investor pay crucial concentration to profitable ratio, as they are main determinate of share price (Enz, 2010). Profitability ratios are used to evaluate how effective a company has been in meeting their profit (Nikolai et al, 2010). Accounting statements reflect what happened in the past but there are some clues to know what can be happen in the future, profitability ratio gives this kind of knowledge to the investors (Brigham & Houston, 2009).
In this section, the author discussed three major profitability ratios to compare the historical performances of Barclays and Standard chartered, such as net profit margin, return on investment and return on equity.
Formula of the ratios:
1. Net profit margin=
2. Return on assets=
3. Return On Equity=
To calculate these three ratios we need to find some data from income statements and balance sheet from annual reports of these banks. The required fields are: Profit after tax, sales, total assets and total equity.
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2.1.1 Data from Barclays’s Annual Report (2007-2011) Barclays PLC
2007 2008 2009 2010 2011 Total Stakeholder Equity 32,476 33,879 47,831 62,262 65,196 Total Assets 1,227,361 1,987,542 1,399,428 1,489,645 1,563,527 Sales 25,308 28,010 21,236 20,035 21,236 Net Income 5,095 5,249 10,289 4,549 3,951
Calculation of ratios Net profit Margin= 20.13197 18.73974 48.45074 22.70527 18.6052 (NI/Sales)*100 Return on Assets= 0.415118 0.264095 0.735229 0.305375 0.252698 (NI/Assets)*100 Return on Equity= 15.68851 15.49337 21.51115 7.306222 6.060188 (NI/Equity)*100 Source: (Barclays Plc, 2007) (Barclays Plc, 2009) (Barclays Plc, 2011)
2.1.2 Data from Standard Chartered Annual reports (2007-2011) Standard Chartered Bank
2007$m 2008$m 2009$m 2010$m 2011$m Total Stakeholder Equity 21,452 22,695 27,920 38,865 41,375 Total Assets 329,871 435,068 436,653 516,560 599,070 Sales 16,176 16,378 12,926 13,500 16,584 Net Income 2,989 3,511 3,477 4,414 4,933
Calculation of ratios Net profit Margin= 18.47799 21.43729 26.89927 32.6963 29.74554 (NI/Sales)*100 Return on Assets= 0.906112 0.807 0.796284 0.854499 0.823443 (NI/Assets)*100 Return on Equity= 13.93343 15.47037 12.45344 11.35726 11.92266 (NI/Equity)*100 Source: (Standard Chartered, 2008) (Standard Chartered, 2010) (Standard Chartered, 2011)
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2.1.3 Comparing Net Profit Margin Carlberg (2002) states that net profit margin give the percentage of net profit against per pound of sales (Carlberg & Carlberg, 2002). Calculation of the Net profit margin through MS- Excel has been shown below:
Net profit Margin (Barclays Vs Standard Chartered) 2007 2008 2009 2010 2011 Barclays 20.13% 18.74% 48.45074 22.71% 18.61% Standard Chartered 18.48% 21.44% 26.90% 32.70% 29.75%
Net profit Margin (Barclays Vs Standard Chartered) 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% 2007 2008 2009 2010 2011
Barclays Standard Chartered
Figure 1: Comparing Net profit Margin
The above figure demonstrates the net profit margin of Barclays and Standard chartered bank. The blue trend represents Barclays and the green trend represents Standard chartered bank’s net profit margin from 2007 to 2011. In 2007, both banks net profit margin was almost same, it was about 20% for both banks. This level continued until 2008. In 2009, Barclays showed good net profit margin and the percentage was 48 where standard chartered was 26%. In 2010, the flow of Barclays declined dramatically but Standard chartered remained the same growth rate. Finally, in 2010 the net profit margin of Barclays became 18% and standard chartered was about 30%. These trend shows that, there were many changes on Barclays net profit margin where standard chartered were able to keep the profit growth rate.
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2.1.4 Comparing Return on Assets Return on asset point out the strategic situation of the business organization. External Investors concentrate on this ratio to analyze the achievement of business strategy and guess the future financial success (Longenecker et al, 2012)
ROA (Barclays vs. Standard Chartered)
2007 2008 2009 2010 2011 Barclays 0.42% 0.26% 0.74% 0.31% 0.25% Standard Chartered 0.91% 0.81% 0.80% 0.85% 0.82%
ROA (Barclays Vs Standard Chartered) 1.00% 0.90% 0.80% 0.70% 0.60% 0.50% Barclays 0.40% Standard Chartered 0.30% 0.20% 0.10% 0.00% 2007 2008 2009 2010 2011
Figure 2: Comparing Return on assets
From the above illustrate we can see that, standard chartered has great return on assets compare to Barclays bank. The blue series indicate Barclays return on assets and green series indicate standard chartered return on assets. In 2007, 2008, 2010 and 2011 Barclays had almost same percentage except 2009 of return on assets in those years was about 28%. In 2009, Barclays had huge return on assets and it was about 74%. On the other hand, standard chartered has almost same percentage of return on assets from 2007 to 2011. The average percentage of return on assets was about 82. This chart shows that, standard chartered is maintaining continues success in return on assets where Barclays has many up and down.
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2.1.5 Comparing Return on Equity The return on equity ratio is the percentage of return of shareholder total equity; this ratio is an index of rate of the return of investors. It provides the actual situation of major financial players (Tracy, 2008).
ROE (Barclays Vs. Standard Chartered) 2007 2008 2009 2010 2011 Barclays 15.69% 15.49% 21.51% 7.31% 6.06% Standard Chartered 13.93% 15.47% 12.45% 11.36% 11.92%
ROE (Barclays vs. Standard charterd) 25.00%
20.00%
15.00%
10.00%
5.00%
0.00% 2007 2008 2009 2010 2011
Barclays Standard Chartered
Figure 3: Comparing Return on Equity
The above figure shows that Barclays had good return on equity until 2009. In 2007 and 2008 Barclays return on equity was average 15% and in 2009 it was suddenly increased up to 22% after 2009 the percentage of return on equity started to decreased. On the other hand, standard chartered had a regular return on equity throughout these five years. There were not too much changes of return on equity of standard chartered from 2007 to 2011. The average return on equity of these five years of standard chartered was about 13%.
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3 Impacts of E-Banking Internet has changed the traditional system of banking. E-banking has lots of positive impacts on banking system; beside this E-banking have some challenges and negative impacts on banks. Below they are discussed: 3.1 Positive Impacts
3.1.1 24 Hours Service E-banking is providing banking services 24 hours a day and 364 days a year. Customer can do banking transaction at any time by log in their account in their bank’s website. Banking transaction is a matter of few clicks on computer now (Scott, 2012). Barclays is the example of best E-banking system. Barclays is providing all kind of services through internet banking and phone banking. Customers can apply for new accounts, credit card and other services through internet. Barclays is providing, personal banking, wealth and investment banking, corporate banking etc (Barclays, n.d). On the other hand, standard chartered is serving personal banking and wholesale banking online and they don’t have 24 hours phone services (Standard chartered n.d). So if we compare the 24 hour service of Barclays and Standard chartered, we would see that, Barclays is serving better compare to standard chartered.
3.1.2 Time consuming E-banking made the banking activities easier for customers. Now customers do not need to stand in the queue to do a transaction. Customer can do any kind of transaction including international within a few minutes by sitting in front of computer. Barclays bank is providing all kinds of services that they usually provide in the branch. Opening a new personal account, corporate banking, wealth and investment banking and other services can be done by Barclay’s website (Barclays, n.d). Standard chartered do not have enough branch in London compare to Barclays but customer still can do banking activities through online although Standard Chartered is providing less online services.
3.1.3 Customer Increases According to Barclay’s annual report 2011, number Barclay’s customers are increasing rapidly in the recent years. Currently Barclays is serving 48 million customers. In the last five years customers increased about 30%. Compare to increase customer Barclays could not increase number of branch but still customers are happy with Barclays because online banking is meeting all needs of customers. From starting of online banking, customer increased rapidly. It could not be achievable to serve the increasing number of customer in the branch (Kesharwani & Bisht, 2012).
3.1.4 Cost Effective E-banking is very cost effective for banks because it reduces the importance of branch as most of the transaction can be done by online, ATM and other electronic source. As a result
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customers are not going to the branch for simple transaction and banks do not need to accommodate extra branch. The overall E-banking system reduces the total cost of the banks. 3.2 Negative Impacts / Challenges
3.2.1 Business Risk E-banking has enormous business risk for the banks. Transactions need to done by ATM or online and there are some obvious chances to misplace individual information of banks customers. In every year, banks are paying lots of money to the customer for this reason. Because, if information of customers is being stolen, it would be banks responsibility to pay for any loses of customers. If we compare Barclays and Standard chartered, Barclays is in huge business risk of E-banking (Barclays, 2011).
3.2.2 Criminal Activities There are lots of criminal activities happening online especially in online banking. As online banking deals with money transaction, Criminals always want to steal bank customer’s personal information. This is a very big challenge for banks that are providing online banking facilities to their customer to reduce the criminal activities. Barclays and Standard chartered bank are taking lots of security in their website to reduce this kind of risk.
3.2.3 Reputational Risk If criminal activities happen in a big amount than the question of reputational risk arise. Barclays was in very much trouble of this kind of risk in 2008 and 2010 (Barclays, 2011). On the other hand, Standard chartered faced reputational risk in Asia in 2007 to 2009 due to online risk. 3.2.4 Security Internet criminal might hack the bank’s server to get financial information. Technology is not statistic, so banks who are providing internet banking facilities must update the software and other internet security. The less security in banking sectors can cause financial, reputational and other loses (Thibodeaux, 2012). Barclays and standard bank have currently strong security for E-banking.
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4 Primary Data Analysis To support the above discussion and find out the real perception of customer about E- banking, the author had to undertake a questioner from discussed banks customer. The author had undertaken the questionnaires in Standard chartered bank, Basinghall Avenue and Barclays bank, Paddington branch. The total respondent were 78 (32 from standard chartered and 46 from Barclays) from both banks. The questionnaire is enclosed in the appendix section (Please see Appendix-1). The questionnaires consist of seven questions (First two is demographic). The finding of the questionnaires has been shown below under heading of each question number:
Question Number one & Two:
The first two questions was demographic asking the gender and age of customers. 51 out of 78 customers are 22 to 50 years old. Below the gender of respondent has been shown:
Q1: What is your Gender? Male 42 Female 36
Gender Of the respondents
Male Female
46% 54%
Figure 4: Gender of Respondents
The above chart shows that, 54% (42 out of 78) respondents were male and 46% (36 out of 78) respondents were female.
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Question Number Three:
Do you do online banking?
Q3: Do you Do online Banking? Yes 69 No 9
Using Online for Banking
Yes No
12%
88%
Figure 5: How many respondents use online banking
The above figure illustrates that, most of the respondents 88% (69 out of 78) respondents uses online banking where a very few respondents 12 % (9 out of 78) are not very interested in online banking. This information indicates that, now most of the people are aware about online banking.
Question Number Four:
How often do you use online banking?
Q4: How often do you use online banking? Very often 31 Few times in a week 12 Few times in a month 15 Very rare 11 Never 9
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Frequency of using online banking
12% Very often 14% 40% Few times in a week Few times in a month Very rare 19% Never
15%
Figure 6: Frequency of using online banking
The above figure indicates that, most of the people are using online for banking. From them, 40% respondents are using online banking very often and 34% of respondents using online banking few times in a week and in a month. On the other hand, 14 % (11 out of 78) are very rare in this category where 12 % (9 out of 78) never use the online banking.
Question Number Five:
Do you feel safe to use ATM and other electronics media to do transactions?
Do customers feel safe to use E- banking
No 45%
Yes 55%
Figure 7: Do customers feel safe to use E-banking
Customers are very confused about the security of E-banking. Although more than half 55% (43 out of 78) of them think that they feel safe to use E-banking facilities but 45% (35 out of 78) do not feel safe to use ATM and other electronic source to do transactions.
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Question Number Six:
For banking transaction what would you prefer?
Online 32%
Branch 68%
Figure 8: Respondents preferring to do banking transaction
Although customers like E-banking facilities but still most of them feel safe to do banking transaction in branch (53 out of 78). On the other hand, only 32% (25 out of 78) respondents think online is the best way to do banking transactions.
Question Number Seven:
Which bank is better for E-banking?
36%
Barclays 64% Standard Chartered
Figure 9: Which bank is better for E-banking
This question was to know the customer perception on Barclays and Standard chartered E- banking. Majority respondents (50 out of 78) think that Barclays is providing better performance than Standard chartered where 36% (28 out of 78) think standard chartered is better for E-banking.
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5 Conclusion Internet has a great influence on banking sector. It made the banking activities easier than before. The aim of this report was to compare the historical performance of Barclays and Standard chartered bank, impacts of E-banking and the customer perception on E-banking. In the first section of the analysis, the author discussed the historical performance of Barclays and Standard chartered through the use of MS-Excel. In the second section, the author discussed the positive and negative impacts of E-banking and finally at the end of this report, the customer perception on E-banking has been discussed through primary data collected by a questionnaire from the customers of Barclays and Standard chartered.
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6 References 1. Barclays (2012) About us. [Online] Available at:
2. Barclays (2012) Our History. [Online] Available at:< http://group.barclays.com/about-barclays/about-us/our-history > [Accessed 15 Oct 2012].
3. Barclays Plc (2007) Annual report 2007. [Online] Barclays Plc Available at:
4. Barclays Plc (2009) Annual Report 2009. [Online] Barclays Plc Available at:
5. Barclays Plc (2011) Annual report 2011. [Online] Barclays Plc Available at:
6. Barclays Plc (n.d) Barclays Online Home. [Online] Available at:
7. Brigham, E.F. & Houston, J.F (2009) Fundamentals of Financial Management. 12th ed. Mason: Cengage learning.
8. Enz, C.A (2010) Hospitality Strategic Management: Concepts and Cases. 2nd ed. Mew Jersey : John Willy & Sons.
9. Kesharwani, A. & Bisht, S.S (2012) The impact of trust and perceived risk on internet banking adoption in IndiaAn extension of technology acceptance model. International Journal of Bank Marketing, 30(4), pp.p303-322.
10. KPMG (2012) UK Banks: Performance Benchmarking report. [Online] KPMG Available at: NMS Page 18 PDF/Market%20Sector/Financial%20Services/uk-banks-performance-benchmarking- report-hy-2012.pdf >[Accessed 16 Oct 2012]. 11. Longenecker, J.G., Petty, W., Palich, L.E. & Hoy, F (2012) Small Business Management: Launching and Growing Entrepreneurial Ventures. Mason: Cengage Learning. 12. Nikolai, L., Bazley, J. & Jones, J (2010) Intermediate Accounting. 11th ed. Mason: Cengage Learning. 13. Standard Chartered (2008) Annual report and accounts 2008. [Online] Available at: 14. Standard Chartered (n.d) Our History. [Online] Standard Chartered Available at: 15. Standard Chartered (2010) Annual Report 2010. [Online] Available at: 16. Scott, S. & Media, D (2012) The Effects of Online Banking. [Online] Available at: 17. Standard Chartered (n.d) Standard Chartered Home. [Online] Available at: 18. Standard Chartered (2011) Annual report 2011. [Online] Available at: HYPERLINK "http://www.standardchartered.com/en/resources/global- en/pdf/annual_reports/Standard_Chartered_Annual_Report_2011.pdf" 19. Tracy, J.A (2008) Accounting For Dummies. New Jersey : Wiley Publishing. 20. Wassenberg, K., Go, C. & John, M (2008) Money Talks Series: The E-Banking Experience. California: University of California. NMS Page 19 7 Appendix Appendix 1 Questionnaires 1. What is your gender? Male Female 2. How old are you? 3. Do you do online banking? Yes No 4. How often you do online banking? Very often Few times in a week Few times in a month Very rare Never 5. Do you feel safe to use ATM and other electronics media to do transactions? Yes No 6. For banking transaction what would you prefer? Online Branch 7. Which bank is better for E-banking? Barclays Standard Chartered NMS Page 20